Why does Balanced Scorecard Development help our clients?

Developing a Balanced Scorecard is an excellent way to support Strategy development and delivery. It compels an organisation to refine and clarify its thinking into a simple dashboard with a small set of clear metrics that can be communicated. The journey of building a BSC engages stakeholders and develops cross-organisation understanding of what is important, breaking down silos, encouraging shared ownership of results within the leadership team and supporting change.

By bringing an independent external view, Catalyst helps organisations to see and understanding the connections in the scorecard, identify appropriate metrics and measurement systems. In most organisations there are significant functional barriers to this, with different teams being responsible for, and focused on, different parts of the scorecard.

Our expertise and facilitation approach helps to surface and test the connections, encouraging a more “end-to-end” view of the organisation and contribution of its component parts. In turn this fosters a wider Continuous Improvement view, where improvement in each element can be seen connecting with the ultimate bottom-line performance and the organisation’s health.

This is an example from work with one of our major clients. This is not the final scorecard but is an excellent illustration of the thought process at a midpoint and the focus on improvement language…increase/reduce, improve, align, ease, improve, develop and engage.

What is Balanced Scorecard Development?

First popularised by Kaplan & Norton, the Balanced Scorecard (BSC) is a structured report used as a Strategy performance management tool. The BSC tracks execution of key activities that facilitate delivery of the organisation’s strategy and monitors the effects and connections between these activities. A 2017 survey highlighted 62% of respondents using BSC to help manage their strategy implementation.

The BSC process may also require the organisation to vocalise its Mission and Vision in more solid and tangible forms than previously existed; this can help increase stakeholder insight and understanding.

The Balanced Scorecard doesn’t replace established financial and operational reporting but provides a high-level summary presentation, focused on the strategic agenda and linking together a balance of financial and non-financial data. The number of data elements is kept to a short list and the objective is to give a closed-loop control mechanism.

Balanced Scorecard Development
Typical generic BSC model with 4 quadrants. Quadrants are modified and new ones added to suit the organisation’s situation.

It’s essential that data to generate the chosen metrics can reliably and accurately be obtained, and that the organisation can effectively intervene to change the performance.

How do we do it?

Catalyst’s approach is to integrate a process-led/continuous improvement mindset into the development and use of the Balanced Scorecard, so that we facilitate a “top-down” and “bottom-up” approach. Bottom-up we recognise that Investment in effective Learning and Growth of the organisation’s capabilities drives better Processes. Efficient processes drive the Bottom-line performance and Effective processes delight and meet Customer demands. Strong Customer satisfaction drives the Bottom-line we are seeking.

We begin work with an organisation top-down by first refining/clarifying the Voice of Business Strategic Aims and any Business Assumptions associated with them. The strategy informs identification of the Bottom-line Metrics, which are typically “Hard/Soft” Financially based but can also incorporate Risk, Reputation, “triple-bottom line” and other elements as appropriate to the organisation’s sector and Mission/Vision. From this starting point we can examine Voice of Customer and Voice of Process data to distil out Customer/Process metrics, including the process x/Y measures (input x’s, in-process x’s and output Y’s). Finally, we cascade down to identifying the metrics that will be used to monitor the development of the organisation’s capability and competencies.

Having completed the metric set we work bottom-up to test the connections implicit in the model; does the organisation have experience and data that validates the logic? The question is “if we improve this…will it have the desired impact on that? For example, do we want to make an investment that does not have a clear link to improving the performance of one or more processes? Deming tells us that most instances where we don’t meet customer needs are due to failures at the Process level.

Our whole approach for the work uses intensive stakeholder input and a facilitated “consensus/workshop” format, as the BSC will only be effective if the organisation sees and supports the metrics, the connections between them and the transparency of the process to derive the scorecard.

Balanced Scorecard Development

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If you would like to find out more about Balanced Scorecard Development and how it could help you and your organisation, then please feel free to contact us. You can do this by clicking on the button below and we will be happy to help.